Michael Zapata and Travis Cocke dont appear to have
much in common at first glance. Zapata, 36, spent ten years in
the Navy, deploying seven times to the Middle East, before
completing his MBA at Columbia University. Cocke, 27, is a
young Houston entrepreneur with an undergraduate degree in
finance from Texas A&M, although he says his real interest
lies in the intersection of history, human psychology and
finance.

What they do share is a passion for investing. It started
early for Cocke, who says he has been a contrarian for as long
as he can remember. Zapata remembers successfully picking a
lucrative stock (Xerox Corp.) for a middle school class
assignment, but says he wasnt really pulled into
investing until, upon leaving the military, he realized he
could apply his skills in analyzing intelligence networks to
finance. This shared interest has led both men past the
naysayers and warning signs and into the turbulent world of
hedge funds. With the growing sentiment that the U.S. stock
market is overvalued and that the mostly mediocre returns by
hedge funds dont justify the high fees they charge,
its a difficult time to be in the industry, particularly
for emerging managers.

Zapata founded New Yorkbased Sententia Capital
Management in 2012 and has gathered $2 million in assets under
management through a value-based approach. Cocke founded Voss
Capital in Houston three years ago, targeting special
situations and so-called deep value opportunities. His firm has
$8.5 million in assets.

Emerging hedge fund managers are always on the hunt for ways
to stand out from the crowd. Monday evening, that shared goal
found both Zapata and Cocke  as well as 18 other fund
managers  at Bloomberg LPs sleek New York
headquarters for a speed-pitching event.
InvestPitch, created by Institutional Investor and
SumZero, an
online network for investment professionals, and hosted by
Bloomberg Tradebook, gave 20 portfolio managers four minutes
each to convince an audience of investors of the value of going
long or short a chosen security.

Cocke, for his part, was determined to cause a buzz at the
event, urging investors to get in on the Kush Rush
of medical marijuana. In a pitch sprinkled with marijuana puns,
Cocke made the case for shorting GW Pharmaceuticals. The
company is lauded as the market leader in the creation of
cannabinoid prescription medicines, but while many investors
believe GW will benefit from the growing acceptance of medical
marijuana use in the U.S., Cocke argued just the opposite. The
company is slowly working toward an FDA-approved therapeutic
product, he said, while competitors receive legislative support
around the U.S. for products like marijuana oils, which have
performed better in medical studies and are subject to less
regulatory scrutiny because they are lower in THC, the
psychoactive chemical in marijuana. Competitors products
are also cheaper than GWs are expected to be.

The only other manager to recommend shorting a stock was Ian
Clark, 28, who warned that a deepwater drilling bubble may be
about to pop the share price of Transocean. Clark, of
Scarsdale, New Yorkbased Dichotomy Capital, argued that a
glut of new rigs and reductions in capital expenditures by oil
companies will depress the Switzerland-based contract
drillers earnings, predicting a 50 percent downside in
its shares.

Other interesting pitches included one from Spencer Grimes,
48, of New Canaan, Connecticutbased Twinleaf Management,
who recommended buying shares of E.W. Scripps Co. The company
owns and operates newspapers and television stations around the
U.S. and should benefit from record campaign ad spending
leading up to the 2016 election, Grimes said, adding that its
recently announced merger with newspaper, television and radio
station conglomerate Journal Communications is a value booster
as well. Grimes also predicted that the merger of Comcast and
Time Warner Cable, should it be approved, will have a positive
impact on Scripps because the cable giants are expected to have
to sell a large chunk of Midwestern subscribers to a third
company, which will likely end up paying roughly three times as
much for Scripps broadcast signals in that region.

The former Navy SEAL Zapata put his money on rent-to-own
furniture and appliance retailer Aarons. The
Atlanta-based companys keep rate, or rate of
customers buying the products they rent, is more than double
that of its primary competitor, Rent-A-Center, Zapata told
II, and has higher cash flows and margins.
Aarons is expanding fast, having recently acquired
Progressive Finance Holdings, a Utah-based lease-to-buy
company, and is currently trading below a $30 per share buyout
offer from private equity firm Vintage Capital Management that
it rejected earlier this year.

The InvestPitch winners wont be announced until
January 7, but it was clear from the comments of Gideon Berger,
who heads up the hedge fund investment operation for Blackstone
Alternative Asset Management (BAAM), that coming through on a
promise to deliver an outsized return on one investment
wont necessarily help a hedge fund break away from the
pack.

With $65 billion in discretionary assets, BAAM is the
worlds largest allocator to hedge funds. Because it is so
hard to find good ideas, and good managers, Berger told the
audience, the firm emphasizes process over performance.
Its crowded, he explained. Its
tough to find good ideas.

Videos of the pitches will be published on
InstitutionalInvestor.com beginning November 17. Sign up to be notified when
new video pitches are live.

Partner Content

An allocation to international bonds exposes Target Retirement Fund investors to an asset class thats not only influenced by different interest rate and inflation dynamics than U.S. bonds, but which also provides a larger opportunity set of credits.